To combat this situation, the concept of unity was developed in the United States and then adopted by the IOCs in a number of other jurisdictions, including the United Kingdom. An example is the redefinition of Balmoral Field7, where the underwriters attempted to reduce their shares because of the high cost of capital and the resulting losses to the licensees. Although the case itself focused on the contractual interpretation of the provisions of the unitary agreement concerning the calculation of participation by the designated expert, the case shows that ukCS licensees will use the redefinition provisions in a single agreement to achieve a reduction in economic losses resulting from the reduction of their shares per unit. A UUOA is usually a complex agreement that requires significant contributions from legal, commercial and technical specialists, including tank engineers, who are familiar with the characteristics of the container. Due to the complexity of a typical UUOA, it is not uncommon for the parts of the unit to take more than a year to reach an agreement on the final UUOA. The exchange of data between licensing groups can be problematic, as licensing groups strive to preserve the confidentiality of their own data acquired in connection with their license. In practice, negotiating a confidentiality agreement between licensing groups can be a lengthy process, especially when the parties do not agree with the specific purpose of using confidential data and then request the collection of data that does not fall within the scope of the confidentiality agreement protecting the confidentiality of the data already exchanged. As a general rule, oil and gas licensees enter into separate Joint Enterprise Agreements (JOAs) that govern the relationship between them in terms of how they wish to jointly conduct exploration, development and production activities for this specific licence. For more information on common enterprise agreements in the oil and gas sector in general, please see the practical terms: objective and principles of the Common Enterprise Agreement and the Common Enterprise Agreement – key clauses. However, there are cases where hydrocarbon reserves are “water-in-water” with two or more licences that would otherwise have no connection to each other.
In this scenario, interdependent questions arise: the unitation agreement will also include a set of concepts justifying further consideration. The main approaches are described below: The Single Agreement Agreement will define the process to be followed by the parties as soon as it is agreed that a redefinition would take place. A typical example is the following process: the Department of Energy and Climate Change (“DECC”) has issued guidelines5 explaining the DECC`s position on the unit; UKCS licensees facing a possible association should carefully read the current legislation, as well as the guidelines.